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Swissy overvalued ?

Market Analysis

GBPCHF, H1 and H4

The SNB left policy unchanged as expected,noting that while the Swiss franc weakened further since the last policy meeting and the “overvaluation has continued to decrease”, the “franc remains highly valued” and the development is still fragile. “Therefore, despite the easing of the situation, the negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary remain essential”. So all unchanged for now, but with inflation projections revised up mainly in the short term and growth expected to rise to 2% in 2018, after an estimated 1% this year, the central bank clearly has a tightening bias and is inching its way to exit steps, while keeping a close eye on the ECB and Brexit developments. With the ECB continuing with net asset purchases until at least the end of September next year and ECB rate hikes not on the agenda until 2019 at the earliest we see the SNB on hold for much of next year. At the same time, central bankers acknowledge the persistent imbalances in mortgage and real estate market, as prices in residential investment property continued to rise strongly. So the countercyclical capital buffer will remain under review.

 The Swiss franc weakened further with USDCHF perked up by 40 pips, and GBPCHF by nearly 65 pips up after the announcement and during the Press conference. The GBPCHF traded above the upper Bollinger Bands pattern in the 4-hour chart, while it broke the confluence of the 2 days resistance, the and the recent swing high at 1.3265. This breakout triggered an entry at 1.3270, with Targets at 50% and 61.8 Fibonacci level set since December 7 peak, at 1.3316 and 1.3350 respectively. Significantly, these levels coincides with the pivot point analysis. Intraday Momentum suggest further bullish momentum, with MACD turning positive in the hourly chart and RSI moving above neutral, with further upside movement. Daily momentum indicators coincide with the intraday picture.  Support set at 1.3165-1.3276.

Nevertheless, the pair moves in the upper bollinger Bands pattern 12 consecutive days.

The BoE is in focus, which expected to announce unchanged policy after hiking last month in 2 hours time. No change decisions on the repo rate, which would leave it at 0.50%, and QE totals (both gilts and corporate bond purchases) are widely expected, while w unanimous votes at the nine-member committee is anticipated.

 

 

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Andria Pichidi

Market Analyst

HotForex

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